In November 2022, the Securities and Exchange Commission (“SEC") adopted amended rules that update the existing reporting requirements on Form N‑PX and create new Form N‑PX reporting requirements for institutional investment managers.[1] The purpose of these amendments is to increase transparency surrounding proxy voting records. Prior to the adoption of this new rule, registered investment management companies (“Funds"), such as mutual funds and exchange traded funds, were required to publicly report their annual proxy voting records on Form N‑PX. However, the SEC determined the content of information in Form N‑PX was not always useful to the public as there was no requirement that the form be machine readable or presented in a standard format. In addition, the SEC wanted to expand the scope of the persons subject to such reporting requirements.
Effective July 1, 2024, both Funds and institutional investment managers who currently file Form 13F under the Exchange Act (“13F Filers") will be required to file Form N‑PX. Funds must continue to report their votes on all matters, while 13F Filers will be required only to report votes pursuant to Section 14A(a) and (b) of the Exchange Act, relating to proposals on matters including executive compensation (say-on-pay), frequency of advisory votes on executive compensation (say-on-frequency), and compensation packages in merger transactions (golden parachute proposals). These requirements on reporting votes will apply to all securities registered under Section 12 of the Exchange Act for which the reporting person exercised voting power, including securities for which the reporting person has direct voting power or indirect voting power through a contract, arrangement, understanding, or relationship (including the discretion to recall a loaned security before a vote).
For each security included on a reporting person's Form N‑PX, the reporting person must include:
- the name of the issuer;
- the CUSIP number;
- the ISIN (International Securities Identification Number);
- the shareholder meeting date;
- an identification of the matter voted on, including a selection from a list of categories the matter concerns (e.g., “Section 14A say-on-pay votes");
- the number of shares voted;
- how the shares were voted;
- whether votes aligned with management's recommendations;
- whether votes were cast in multiple manners and if so, the number of votes cast in each manner; and
- the number of shared loaned that the reporting person did not recall.
In cases where a reporting person has a policy of not voting, as would be disclosed on Form ADV, and did not vote during a the covered period, they can simply file a Notice N‑PX Report, which includes only the form's cover page and signature page. We also note that a reporting person's Form N‑PX will be made available to the public for all reporting persons.
While these amendments become effective July 1, 2024, the reporting period for votes cast by 13F Filers begins on July 1, 2023 and runs through June 30, 2024. 13F Filers will need to file their first N-PX no later than August 31, 2024. As such, Funds and 13F Filers will need to begin retaining records necessary to meet the new reporting requirements for proxy votes beginning on July 1, 2023.
Thank you to counsel Lauren Cook Jackson in our Washington, D.C. office, partner Kevin Bettsteller in our Los Angeles office, and associates Chris Connelly and Nicholas Whetstone in our Orange County office for their assistance with this update.
[1] Institutional investment managers include registered investment advisers. The term “institutional investment manager" includes any person, other than a natural person, investing in or buying and selling securities for its own account, and any person exercising investment discretion with respect to the account of any other person. See section 13(f)(6)(A) of the Exchange Act [15 U.S.C. 78m(f)(6)]. The term “person" includes any natural person, company, government, or political subdivision, agency, or instrumentality of a government. See section 3(a)(9) of the Exchange Act [15 U.S.C. 78c(a)(9)]. Entities serving as managers could include, for example: banks, insurance companies, and broker-dealers that invest in, or buy and sell, securities for their own accounts; corporations and pension funds that manage their own investment portfolios; or investment advisers that manage private accounts, mutual fund assets, or pension plan assets.